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Life Insurance Types at Different Life Stages

Review Your Life Insurance Cover at Different Stages

As one of the most underinsured nations in the developed world, the vast majority of Australians either have none or an insufficient amount of insurance cover in place. While most of us have a default level of cover provided through our super, studies have shown that this is usually only a fifth of what you really require. What’s more, many families don’t have any “living insurance” in place , which is designed to protect the main income earner should they be temporarily and permanently out of the workforce due to serious injury or illness. It’s critical to review the cover you have as the years go by and your lives change to ensure we still have the right cover in place.

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Type of ProtectionLife InsuranceIncome Protection

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Level of ProtectionCoverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount.Calculator

TPD CoverProvides a lump sum payment if you become totally and permanently disabled and are unable to return to work.

Trauma CoverProvides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.

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What Types of Life Insurance Do I Need At Different Life Stages?

Type

Purpose

When to Take it Out

What Can it Cover?

Life Insurance

Provides a lump sum benefit in the event of death or terminal illness with 12 months to live

It’s worth considering life insurance as soon as you have any significant financial obligations that would need to be covered in the event of your death. Some key stages that people consider life cover include:

When they buy a house

When they get married

When they have kids

Outstanding mortgage payments and other debt

Everyday living expenses

Education costs

Cost of a funeral

Income Protection

Provides an ongoing benefit of 75% of your income if you are forced to take time off work due to serious illness or injury. This is usually paid monthly. Additional benefits can be provided to cover rehabilitation costs

Income protection is worth considering if you are working full-time and are no longer dependent on your parents or anyone else for financial support

Mortgage or rent repayments

Daily living expenses

Rehabilitation expenses

Trauma Insurance

Provides a lump sum benefit if you suffer a trauma event that is specified on your policy. Conditions include:

Stroke

Cancer

Heart Attack

Similar to Life Cover, Trauma Insurance is worth considering when you have significant financial obligations. It is often bundled under the same policy as life cover. Trauma Insurance is often quite popular among older people as they become more susceptible to suffering a condition

Outstanding debts

Daily living expenses

Rehabilitation expenses

Additional medical costs

TPD Insurance

Provides a lump sum benefit if you become disabled as defined under the policy

Similar to both Life and Income Cover, TPD is worth considering as soon as you start full-time employment and have financial obligations to cover

Outstanding debts

Daily living expenses

Rehabilitation expenses

Additional medical costs

Modifications to your home if necessary

I've Already Got Cover in Place...Why Do I Need to Review It?

Even if you already have cover in place, it is recommended you review your cover at least once a year. Here are some reasons why:

It Might Not be Enough

The cover you have may not be sufficient to cover new financial obligations. Events that may trigger this include:

An increase in mortgage debt after the purchase of a new home

The birth of a child

New financial dependence from another family member

Changes to income

It Might be Too Much!

You may find that you actually have too much cover in place and are paying hundreds in premiums for insurance you don’t need. Events that may reduce your cover requirements include:

Paying off your mortgage

Kids move out of home

Separation or divorce

You may also need to review the beneficiaries that you have listed on your policy following some of the events above.

There Might be a Better Deal out There

You may find the cover you took out 10 years ago doesn’t provide protection suitable to your needs and there is a more appropriate option at a better price. Speaking with an adviser to see what else is available could save you thousands. The service is usually provided and there is absolutely no obligation to sign up for cover.

Hot Tips for Reviewing Your Life Insurance

When taking out a new policy, you may be required to undergo another round of medical underwriting that could lead to an increase in your premiums

You might want to consider funding your cover through your superannuation. Make sure you have a clear understanding of both the benefits and disadvantages of super funded cover before cancelling your cover

Keep an eye out for special discounts and exclusive offers from providers

No idea what you need? It might be worth speaking with an insurance consultant to help you find a suitable option at a competitive rate

Consider bundling different types of cover to save on your premium

Looking to get your partner covered? Joint policies can offer discounts of up to 10% on your premium

Compare, compare, compare - taking the time to research different policy options and receive a number of quotes from different providers could save you thousands

Don’t base your decision on price alone - cheaper policies may not offer the level of cover you need. Read the product disclosure statement before applying to know exactly what you are covered for

Whether you’re a working mom or a full-time homemaker, one thing’s for certain, you’re an important part of your family’s emotional and financial life. Getting your own life insurance is an important step in keeping your family’s future on track.

An insurance researcher and writer for finder.com.au who loves finding an answer to the question "Am I covered for ________?" Maurice has also completed a Tier 1 Life Insurance and a Tier 2 General Insurance Certification under ASIC's Regulatory Guide 146. This means he can confidently provide general advice for life insurance and non-life insurance products.

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